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Course Code : MS - 423
Course Title : Marketing of Financial Services
1. Do a small survey and list the various mutual funds schemes available in the market. List the distinguishing
features of any three mutual fund scheme.
Types of Mutual Funds Scheme in India
Wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return
expectations etc. The table below gives an overview into the existing types of schemes in the Industry.

• By Structure
o Open - Ended Schemes
o Close - Ended Schemes
o Interval Schemes

• By Investment Objective
o Growth Schemes
o Income Schemes
o Balanced Schemes
o Money Market Schemes

• Other Schemes
o Tax Saving Schemes
o Special Schemes
 Index Schemes
 Sector Specific Schemes

Equity Schemes: This type of fund predominantly invests in equity shares of companies. It provides returns by way of
capital appreciation. This type of fund is exposed to high risk and hence return may fluctuate. As it invests only in
stocks, it is riskier than debt funds. The returns will depend on the performance of the company that the fund invests
in. However, on the flipside, this fund has a high return capability since equities have historically outperformed all
other asset classes. There are several types of equity schemes based on different categorization parameters.

1. Large cap funds / blue chip funds - invest in large company stocks, typically from BSE 100 index. Generally low
risk investment with moderate returns.

2. Mid cap / small cap funds - Mid cap & small cap funds are generally considered riskier because smaller companies
have higher business risks. At the same time, they can give multi bagger returns because smaller companies can grow
multi fold if they are successful.

3. Sector Funds: These funds are the riskiest amongst equity funds as these invest only in specific sectors or industries.
The performance of sector funds depends on the fortunes of specific sectors or industries. This type of funds
maximizes returns by investing in the sector, when the sector is expected to boom and gets out before it falls. You
should invest in these funds only if you really understand the sector and its trends.

4. Index Funds: These funds track a key stock market index like BSE Sensex or NSE S&P CNX Nifty. It will invest
only in those stocks which form the market index, as per the individual stock weightage. The idea is to replicate the
performance of the bench marked index. The performance should ideally be better than or at least the same as the
concerned index. The exit load of these schemes is usually lower than regular schemes.

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Debt Schemes: Debt schemes invest mainly in income bearing instruments such as bonds, debentures, government
securities and commercial paper. This type of fund basically invests in FD like instruments that pay interest based on
various market factors. Its volatility depends on the economy reflected by factors such as the rupee depreciation, fiscal
deficit and inflationary pressures. Broadly speaking, the returns from pure debt schemes will be in line with bank FDs.
There are short term, medium term and long term debt funds based on the time horizon they cater to.

1. Gilt Funds: This is a sub-type of debt funds, which invests only in government securities and treasury bills. They are
generally considered safer than corporate bonds and are more tuned towards long term investments.

2. Monthly Income Plans (MIPs): This is basically a debt scheme which invests a marginal amount of money (10%-
25%) in equity to boost the scheme's return. This fund will give slightly higher return than traditional long term debt

3. Money Market Funds (MMFs): These are also known as liquid funds. These funds are debt schemes that invest in
certificate of deposit (CDs), Interbank call money market, commercial papers and short term securities with a maturity
horizon of less than 1 year. The funds objective is to preserve principal while yielding a moderate return. It is a low
risk- low return investment which offers instant liquidity.
Balanced Schemes / Hybrid Schemes: This scheme invests in both equity shares and in income bearing instruments in
such a proportion that balances the portfolio. The aim is to reduce the risk of investing in stocks by having a stake in
the debt market as well. It usually gives a reasonable return with a moderate risk exposure. There can be hybrid funds
that are more oriented towards equity (60-70% in equity) and there can be debt oriented hybrid funds (60-70% in debt).

2. Explain the various marketing orientations and discuss which one is most appropriate for marketing of
financial services.
Marketing Orientation
Marketing orientation is defined as the implementation or completion of a marketing concept that essentially caters to
the customers. The term is otherwise known as marketing concept or consumer focus. With marketing orientation, a
business revolves its strategic decisions around the wants and needs of the target market, including potential
customers. A company that is marketing-orientated has the commitment to valuing customers and the customers’
needs. In fact, it can even contribute to the transformation of a company’s business culture.
This marketing concept involves three essential steps in being customer-focused. First, the wants and needs of the
customers are researched and identified. Then, the research outputs are studied by the marketers and new products are
created based on the consumer needs. Finally, customer satisfaction is aimed after public awareness and introduction
of the product is made.
A marketing-orientated business is characterized by various attributes. The company makes good and extensive use of
marketing research, develops new and broad products, highlights product value and benefits, uses product innovation
methods, and designs supplementary services or customer benefits such as delivery, installation, warranty, and credit
availability. All these are geared toward customer advantage.
Marketing orientation has three common alternatives which can be adopted by a company and these are sales
orientation, product orientation, and production orientation.
Product Orientation
As the term clearly implies, a business organization that makes use of product orientation primarily focuses on product
quality. A company believes that if the products offered in the market are of good quality and high standard, customers
are sure to buy and take advantage of it. The production of these high quality products are either a response to the
needs of the customers or by pure innovation

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A good example would be mobile phone companies. Let us take Apple as an example of a company that always makes
sure their phones have a competitive edge over the rest of the mobile phone manufacturers. They create phones with
features that attract the target market. So, in the field of technology, Apple may be considered a technical leader.
Companies that employ product orientation invest on product innovation as a way to attract the market. But, in order to
keep the competitiveness in a certain industry, a company should always highly consider the recent changes and
developments in technology and customer preferences. Otherwise, it may lose its ground to other competing
Sales Orientation
Sales-orientated organizations are targeted not on the customer needs and product quality but the selling and promotion
of the products to the market. Typically, this marketing concept includes selling the company’s existing and current
products along with the use of promotional methods in order to gain a maximized profit. Businesses that seem to have
a hard time selling their available product or services are more aggressive in pushing sales, pricing, and distribution.\
If the company’s product stocks have barely moved and remain stagnant on the store shelves, for example, the
company will utilize sales orientation to push the sales of these stocks without much consideration for customer tastes
and preferences.
As such, a sales-orientated business does not place a high priority on production but may need to employ product
orientation by innovating existing products to suit to changing customer preferences.

Production Orientation

This alternative is different from product orientation in a way that product-orientated businesses are concerned more
on the creation and manufacturing of as many product items as possible. A company that focuses more on generating
high volume of its products is aiming to maximize revenue growth and profitability.

With product orientation, product output has more importance than the customer needs. A business may focus on this
type of orientation if it is more than capable to cater to a large market without having to risk on the production.

The law of economics is highly relevant and applicable to this orientation. If the demand is high, the company may
increase the supply of the products as a way to generate more profits. A significant increase in profit is usually
observed if the high demand for a product or service is coupled with minimal changes in customer preferences. Only
when a company is confident that selling and promotion is not an issue can they focus on production orientation
Process orientation:
Following a process or a procedure is a way of preventing chaos or troubles in life. Day-to-day examples like
following the signal, adhering to a queue, etc. can be looked upon as ways in which order is brought about in our life.
In certain scenarios, where individuals tend to miss out on the process or rules, officials are appointed to enforce the
same so as to maintain order and convenience.
The same is applicable to software development too. It is not uncommon that we are often faced with the question, do
we need process orientation? The answer is not just a ‘yes or no’ situation, but a whole detailed introspection needs to
be carried of why we need it and how we can bring in an orientation to avoid chaos in software development. This
article is a detailed discussion on the need for process orientation and the way in which it can be achieved.

Process orientation is suitable for financial services in Current Scenario

Software development and maintenance requires processes and practices that contribute to the quality of the software.
Thus quality software needs to be bug free and with necessary standards enforced. The difference in a code being good

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or bad is formed by the processes and their proper orientation in the whole development. It is a common thought that
however good or bad a code is, it will not cause any harm as long as the code works. It is very rare that people take
into consideration standards and regulations to make code free of errors and coding standard defects.

What is Process Orientation?

Any defined set of guidelines, processes and infrastructure that is used for aiding members of a team to provide
qualitative and consistent solutions or end-products is known as process orientation.

Need for Process Orientation

When we pay for a product, we expect it to be the best and not with scars or defects. The same is the case with
software products. A product that is created at the end of the development phase is required to be a complete working
component without any major defects. It is a must to ensure that the product adheres to the customer specifications.
Any deviations or defects can lead to customer dissatisfaction and concerns.

For a product to possess minimal defects and deviations, it is necessary to track the software processes and measure for
analysis on a frequent basis. A thorough review and defect analysis before the deployment will help not only ensure
completeness of the code but will also enable fixing of bugs, if found.

Process orientation and adherence to standards will not only help in finding out the defects, but also enable easy
tracking and resolution with a short timeframe. This is one another advantage that is obtained from process orientation.
Thus these points define the need for process orientation in any software development or maintenance as an effective
means of defect and chaos prevention. Now that we know why we require process orientation, let us just take a look
into the aspects of process orientation.

Benefits of Process Orientation

The primary benefit of process orientation is the elimination of chaos and inconsistency in the software product. This
benefit is added on with many more things to bring in a complete enhanced feel from the orientation. Productivity and
efficiency of the team members are increased with process orientation.

As individuals of a team tend to follow process, defects are reduced and quality of the product increased. The
efficiency of the team is increased multi-fold and thus enables the product to be delivered on-time. Also as the
complete process and the product are thoroughly documented, the process of transition or handover becomes very
simple and fast.

3. What are pricing objectives. Explain the pricing methods used for pricing of banks product.

Pricing objectives or goals give direction to the whole pricing process. Determining what your objectives are
is the first step in pricing. When deciding on pricing objectives you must consider: 1) the overall financial,
marketing, and strategic objectives of the company; 2) the objectives of your product or brand; 3) consumer
price elasticity and price points; and 4) the resources you have available.

The different methods of pricing can be grouped under the following categories:-

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• Cost based pricing

• Demand based pricing
• Competition-oriented pricing
• Differential pricing
• Going rate or “Follow the crowd”

The different pricing methods are explained in detail as follows:-


Under this category, only one approach has been taken into consideration i.e. Mark-up pricing / Cost plus pricing.

Mark-up Pricing refers to the pricing method in which the selling price of the product is fixed by adding a margin to
the cost price. The mark-ups vary depending on the nature of products & markets. Usually, the higher the value of the
product (unit cost of the product) the larger the mark-up & vice-versa. Again, the faster the turn round of the product,
the smaller the mark-up vice-versa.


Some firms charge different prices for the same product in different zones / areas of the market. Sometimes, the
differentiation in pricing is made on the basis of customer class rather than marketing territory. Sometimes, the
differentiation is on the basis of volume of purchase. Differentiation on the basis of volume is more common than
differentiation based on customer class in marketing territory.


In this method, the firm prices its products at the same level as that of the competition. This method assumes that there
will be no price wars within the industry. This is a method commonly used in an oligopolistic market. Despite its
advantage of preventing price wars, the method suffers from serious limitations. The first is that, it is not necessarily
true that all firms or the leader firm is operating efficiently. In case, it is not, it will mean that the follower firm will
also adopt a price level which reflects leader’s inefficiency rather than the firm’s efficiency. Besides, it is not always
true that a decision taken in collective wisdom is the best. It may certainly not be so from the customer’s point of view.


The following methods belong to the category of demand / market based pricing:

• ‘What The Traffic Can Bear’ Pricing

• Skimming Pricing
• Penetration Pricing

The basic feature of all these demand based methods is that profits can be expected independent of the costs involved,
but are dependent on the demand.

‘What the Traffic Can Bear’ Pricing

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As per pricing based on ‘what the traffic can bear’, the seller takes the maximum price which the customers are willing
to pay for the product under the given circumstances. It is not a sophisticated method. It is used more by retail traders
than by manufacturing firms.

Skimming Pricing::Skimming Pricing aims at high price & high profits in the early stage of marketing the product. As
the word skimming indicates, this method literally skims the market in the first instance through high price &
subsequently settles down for a lower price.

Penetration Pricing:Penetration pricing, as the name indicates, seeks to achieve greater market penetration through
relatively low prices. It is the opposite of skimming pricing. This method too is quite useful in pricing of new products
under certain circumstances.


In several industries, competition oriented pricing methods are followed. The methods under this category rest on the
principle of competitive parity in the matter of pricing. Competition based pricing, or competitive parity pricing does
not, however, mean exactly matching competition.

Three policy alternatives are available to the firm under this pricing method:

• Premium Pricing
• Discount Pricing
• Parity Pricing / Going Rate Pricing

Premium pricing means pricing above the level adopted by competitors; discount pricing means pricing below such
level; and parity pricing means matching competitors pricing. Where supply is more than adequate to meet demand &
the market remains competitive in a stable manner & where the channel & consumers are well aware of their choices,
parity pricing may be the answer. Similarly, when a market leader has established a market price with the intention of
stabilizing the price, the smaller firms in the industry may have to go in for parity pricing.

4. List and explain the various instruments used for project financing? Choose a project of your choice and find
out the sources of financing of the project.

Project finance is the long term financing of infrastructure and industrial projects based upon the projected cash
flows of the project rather than the balance sheets of the project sponsors. Usually, a project financing structure
involves a number of equity investors, known as sponsors, as well as a syndicate of banks that provide loans to
the operation. The loans are most commonly non-recourse loans, which are secured by the project assets and paid
entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors, a
decision in part supported by financial modeling. The financing is typically secured by all of the project assets,
including the revenue-producing contracts. Project lenders are given a lien on all of these assets, and are able to
assume control of a project if the project company has difficulties complying with the loan terms.

Generally, a special purpose entity is created for each project, thereby shielding other assets owned by a project
sponsor from the detrimental effects of a project failure. As a special purpose entity, the project company has no
assets other than the project. Capital contribution commitments by the owners of the project company are

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sometimes necessary to ensure that the project is financially sound. Project finance is often more complicated than
alternative financing methods. Traditionally, project financing has been most commonly used in the mining,
transportation, telecommunication and public utility industries. More recently, particularly in Europe, project
financing principles have been applied to public infrastructure under public–private partnerships (PPP) or, in the
UK, Private Finance Initiative (PFI) transactions.

Risk identification and allocation is a key component of project finance. A project may be subject to a number of
technical, environmental, economic and political risks, particularly in developing countries and emerging markets.
Financial institutions and project sponsors may conclude that the risks inherent in project development and
operation are unacceptable . To scope with these risks, project sponsors in these industries (such as power plants or
railway lines) are generally completed by a number of specialist companies operating in a contractual network
with each other that allocates risk in a way that allows financing to take place. "Several long-term contracts such as
construction, supply, off-take and concession agreements, along with a variety of joint-ownership structures, are
used to align incentives and deter opportunistic behaviour by any party involved in the project."The various
patterns of implementation are sometimes referred to as "project delivery methods." The financing of these
projects must also be distributed among multiple parties, so as to distribute the risk associated with the project
while simultaneously ensuring profits for each party involved.

A riskier or more expensive project may require limited recourse financing secured by a surety from sponsors. A
complex project finance structure may incorporate corporate finance, securitization, options, insurance provisions
or other types of collateral enhancement to mitigate unallocated risk

Project finance shares many characteristics with maritime finance and aircraft finance; however, the latter two are
more specialized fields

Acme Coal Co. imports coal. Energen Inc. supplies energy to consumers. The two companies agree to build a power
plant to accomplish their respective goals. Typically, the first step would be to sign a memorandum of understanding to
set out the intentions of the two parties. This would be followed by an agreement to form a joint venture.

Acme Coal and Energen form an SPC (Special Purpose Corporation) called Power Holdings Inc. and divide the shares
between them according to their contributions. Acme Coal, being more established, contributes more capital and takes
70% of the shares. Energen is a smaller company and takes the remaining 30%. The new company has no assets.

Power Holdings then signs a construction contract with Acme Construction to build a power plant. Acme Construction
is an affiliate of Acme Coal and the only company with the know-how to construct a power plant in accordance with
Acme's delivery specification.

A power plant can cost hundreds of millions of dollars. To pay Acme Construction, Power Holdings receives financing
from a development bank and a commercial bank. These banks provide a guarantee to Acme Construction's financier
that the company can pay for the completion of construction. Payment for construction is generally paid as such: 10%
up front, 10% midway through construction, 10% shortly before completion, and 70% upon transfer of title to Power
Holdings, which becomes the owner of the power plant.

Acme Coal and Energen form Power Manage Inc., another SPC, to manage the facility. The ultimate purpose of the
two SPCs (Power Holding and Power Manage) is primarily to protect Acme Coal and Energen. If a disaster happens at
the plant, prospective plaintiffs cannot sue Acme Coal or Energen and target their assets because neither company
owns or operates the plant.

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A Sale and Purchase Agreement (SPA) between Power Manage and Acme Coal supplies raw materials to the power
plant. Electricity is then delivered to Energen using a wholesale delivery contract. The cash flow of both Acme Coal
and Energen from this transaction will be used to repay the financiers.

5. List and explain various behavioral models used for analyzing buyer’s behaviour.

Buyer decision processes are the decision making processes undertaken by consumers in regard to a potential market
transaction before, during, and after the purchase of a product or service.

More generally, decision making is the cognitive process of selecting a course of action from among multiple
alternatives. Common examples include shopping and deciding what to eat. Decision making is said to be a
psychological construct. This means that although we can never "see" a decision, we can infer from observable
behaviour that a decision has been made. Therefore we conclude that a psychological event that we call "decision
making" has occurred. It is a construction that imputes commitment to action. That is, based on observable actions, we
assume that people have made a commitment to effect the action.

In general there are three ways of analyzing consumer buying decisions. They are:

• Economic models - These models are largely quantitative and are based on the assumptions of rationality and
near perfect knowledge. The consumer is seen to maximize their utility. See consumer theory. Game theory
can also be used in some circumstances.
• Psychological models - These models concentrate on psychological and cognitive processes such as
motivation and need recognition. They are qualitative rather than quantitative and build on sociological factors
like cultural influences and family influences.
• Consumer behavior models - These are practical models used by marketers. They typically blend both
economic and psychological models.

Nobel laureate Herbert Simon sees economic decision making as a vain attempt to be rational. He claims (in 1947 and
1957) that if a complete analysis is to be done, a decision will be immensely complex. He also says that peoples'
information processing ability is very limited. The assumption of a perfectly rational economic actor is unrealistic.
Often we are influenced by emotional and non-rational considerations. When we try to be rational we are at best only
partially successful.

6. What are networked banks? Disucss the technologies used in networked banks.
The networked bank in a networked economy

The networked bank in a networked economy

In a network environment, power shifts from specific products and facilities to ubiquitous, shared channels, says
Howe. "The Customers will choose the products, services, or channels they want from whatever provider best meets
their requirements, with little or no loyalty to a particular financial institution," Banks will have to manage channels to
offer "complete value propositions, not just products."
Assets will have to be revalued in the new era, says Howe. The networked bank's most important asset won't be its
physical presence, but how much it knows about its customers and how effectively it uses that knowledge to create
products tailored to their preferences and lifestyles.

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Banks will have to grow new institutional cultures according to Howe. From the CEO down, everybody will have to
learn how to operate efficiently in a shifting environment where the bank does not control all the components of its
own operations.
To succeed, every bank must have a technology that reflects its own core competencies and works for its customers
Howe identifies three possibilities:
1. The customer-centric technology
The heart of this technology is building strong, interactive relationships that will grow "co-evolved" customers. "Co-
evolution," says Howe, "implies that the bank teaches as well as learns from the customer in developing new products
and services." For example, the bank might create a loan tailored to a single customer, based on what it learns about
her needs and preferences from her demographics and information "mined" from her transaction history. By sending
her interesting, helpful information from time to time, the bank cultivates the customer's ability and readiness to make
financial decisions.
2. The life-event technology
Here, the bank packages services based on what customers need at different fife stages. For example, a retirement suite
might include pensions, trusts, short- and long-term investments, estate planning, financial advice, healthcare,
retirement care, and travel. "The bank becomes the one source for everything to do with retirement,"
Another version of this technology is to build comprehensive packages for communities of customers bound together
by certain affinities. The most-frequently-mentioned prize; winning the accounts of college students and servicing
them throughout their lives.
3. The commodity technology
Here, the bank competes on price. To maximise distribution, these self-effacing banks must be ready to co-brand their
products or even offer them under private labels. They aim to be best for a certain product, such as mortgages or auto
loans. They must have a tough-love culture that simultaneously keeps pressures on costs and customer satisfaction.